Senegal and the IMF
Enhanced Structural Adjustment Facility
Economic and Financial Policy Framework Paper
Prepared by the Government of Senegal in consultation
with the Staffs of the International Monetary Fund and World Bank
June 4, 1999 Use the free Adobe Acrobat Reader to view Tables 1-4.
1. The macroeconomic and structural adjustment reform program undertaken by Senegal since the devaluation of the CFA franc in January 1994 aims at the restoration of external balance, the consolidation of public finances, and the strengthening of Senegal's competitiveness in order to achieve sustained and balanced growth. Structural and sectoral reforms have been undertaken with the view to liberalizing the economy, reducing the size of the public and parapublic sectors, and improving the regulatory environment to promote private sector activities. These reforms are being deepened and new reforms have been initiated with regard, in particular, to good governance, poverty reduction, and development of human resources. Since April 1998, Senegal has started to implement the Common External Tariff (CET) of the West African Economic and Monetary Union (WAEMU) as part of the regional integration efforts. Senegal's adjustment efforts have been supported with significant assistance from the international community, in particular the International Monetary Fund, the World Bank, the African Development Bank, the European Union and other multilateral and bilateral partners. These development partners also helped Senegal to fully take advantage of the Consultative Group and Paris Club meetings, held in April and June 1998, respectively.
2. Overall, the adjustment policies implemented between 1994 and 1998 produced favorable results, and contributed to the improvement in the economic and financial situation, despite unfavorable weather in 1997 and 1998. Real GDP growth increased, inflation was contained below 3 percent, the deficit in the Government financial operations was reduced, and the external current account balance (excluding official transfers) improved.
3. During 1999-2001, the government intends to implement policies needed to sustain strong, durable, diversified, and balanced growth. It will accelerate and deepen the structuralreforms started in 1994, and in particular those under way in the water, transport, energy, and agriculture sectors. It will also pay close attention to policy coordination issues in the context of the WAEMU-led regional integration effort.
II. Recent Economic Developments (1996-1998)
4. The determined implementation of the program during the period 1996-1998 yielded encouraging results with regard to the strengthening of the macroeconomic position, structural reforms, and the implementation of sectoral programs in the agriculture, energy, and transport sectors. In the macroeconomic area, real GDP growth surpassed 5 percent on average between 1996 and 1998, driven essentially by services, construction, and industrial production, while agricultural production declined because of poor weather. Annual inflation was at 1.1 percent in 1998, down from 1.8 percent in 1997 and 2.6 percent in 1996. Taking into account the impact of the Paris Club rescheduling granted in 1998, the external current account deficit (excluding official transfers) as a percentage of GDP was one percentage point lower than the 7.8 percent of GDP achieved in 1997.
5. The government's strong fiscal policy stance resulted in a continued surplus in the basic fiscal balance, which reached 2.6 percent of GDP in 1998, reflecting an increase in revenue collection--despite the tariff reduction implemented in April 1998--and improved control over current expenditure. Fiscal revenue increased on average by 8 percent during the period between 1996-1998 to reach 16.7 percent of GDP in 1998. At the same time, total expenditure and net lending rose more moderately, spurred mainly by increased capital expenditure financed by budgetary resources.
6. The monetary policy of the Central Bank of West African States (BCEAO) was prudent, and was aimed at maintaining price stability and building up the foreign exchange reserves of the monetary union. The growth of the money supply was in line with nominal GDP growth. Net foreign assets of the banking system increased by CFAF 85.8 billion in 1997 (16 percent of beginning-of-period money stock) and CFAF 34.5 billion in 1998 (6 percent of beginning-of-period money stock). Net claims on government were CFAF 14.6 billion less than program projections while credit to the economy increased by 11.2 percent.
7. The important structural reforms undertaken during the period 1996-1998 have improved the business environment for the private sector while laying the foundations for good governance. At end-December 1998, 12 operations under the privatization program initiated in 1994 had been successfully completed. To improve the functioning of the legal system, the first phase of the modernization of clerks' offices has been completed. Steps taken to modernize the business law have resulted in the preparation of new provisions for arbitration and an arbitration court has been set up in the Dakar Chamber of Commerce. Also, the government has taken measures to improve the functioning of the judicial system by increasing the recruitment of magistrates and clerks, while improving their training in business law.
8. The government has initiated a national debate to establish a participatory process in the conduct of public affairs and to improve governance. A general inspectorate has been created to monitor the efficiency and quality of service provided by the judiciary. A court of financial discipline has also been instituted, replacing the former court of budgetary discipline, for the purpose of imposing sanctions for any negligence in the management of public resources. To increase the efficiency of the administration and improve user services, the government has launched a reform of the system of civil service promotions, based on both seniority and merit, and has conducted surveys on the quality of public service ahead of the national debate on this issue.
9. Regarding sectoral reforms, the liberalization and restructuring of the agricultural sector continues. A major program of phosphate treatment of soils has been underway since the 1997/98 crop year to restore fertility. Progress is being made in the restructuring of the rural development associations. The blueprint for the institutional reform of the cotton company (SODEFITEX), has been approved and the reform will be completed in 1999. Following the liquidation of Société de Développement et de Vulgarisation Agricole (SODEVA), an agricultural and rural advisory agency (ANCAR) has been set up. The government has decided to institute a quality control unit for horticultural products to help promote exports. Strong efforts are under way to empower farmers and their producer organizations in decisions on agricultural research and extension.
10. In the energy sector, major reforms have been implemented since April 1998. Privatization of the electricity company (SENELEC) was initiated and the activities of the company were taken over by a private operator in March 1999. In the petroleum products subsector, the stabilization mechanism was abolished so as to allow retail prices to fluctuate in line with international prices. The monthly adjustment of retail prices, originally scheduled for 1999, was introduced already in May 1998. Imports of petroleum products were liberalized. To better secure fiscal revenue, a specific tax on super and regular gasoline, diesel oil, and fuel for fishing boats (pirogues) was introduced in May 1998. To protect the activities of the refinery company (SAR) during the period in which it is undertaking investments to increase competitiveness, a degressive surtax on white products was introduced, to be abolished in May 2002. The government will progressively reduce the subsidy on butane gas and fuel granted to SENELEC in accordance with the agreed schedule. Regarding transport, the program implemented by the government with assistance from the World Bank has begun to reduce the inefficiencies in this sector.
11. Despite the encouraging performance on the macroeconomic front in recent years, and progress achieved in the structural and sectoral areas, Senegal's economy continues to suffer from structural weaknesses. The government's financial position remains vulnerable because of the relatively overall weak tax efforts (about 16 percent of GDP) while the high cost and deficiencies in the quality and availability of factors of production (water, electricity, transport) and weak basic infrastructure severely hampers competitiveness. In addition, school enrollment rates and the coverage of health infrastructure are still low; investment--particularly foreign investment--is still too limited to contribute significantly to strong, sustainable, and diversified economic growth, which is needed to reduce growing poverty in rural and urban areas.
III. Strategies and Objectives for 1999-2001
12. Over the next three years, the government will implement further reforms in an effort to eliminate structural weaknesses and stimulate growth. The government's strategy seeks to raise real GDP growth to 6 percent on average during the period, which would increase per capita income by more than 3 percent a year; keep inflation below 3 percent and restrict the external current account deficit (excluding official transfers) to about 6 percent of GDP; maintain a basic budget surplus in excess of 2 percent of GDP; and improve durably the social indicators, so as to achieve a lasting reduction in poverty.
13. Sustained growth and lasting reduction of poverty and unemployment, will depend to a large extent, on raising domestic investment and savings. Thus, the investment to GDP ratio is projected to increase from 18.1 percent in 1998 to 20 percent in 2001, while domestic saving is projected to go up from 12.4 percent of GDP in 1998 to 15.1 percent in 2001. Mobilization of domestic financial savings will be encouraged by extending the network of mutual savings and loan associations in rural and urban areas, and by diversifying savings instruments.
14. The strategy guiding the government's actions is based on the completion of reforms already begun with respect to the common external tariff, energy, transport, promotion of the private sector, and good management of central and local government. Moreover, improved management of public investment will be combined with a shift in emphasis toward the social sectors of education and health, and basic infrastructure. Poverty alleviation, the promotion of the role of women, an appropriate population policy, and better natural resources management will be the core elements of the government's strategy of acceleration and diversification of growth and sustainable development.
IV. Macroeconomic Policies
15. During the period 1999-2001, government policy will stress pursuit of the consolidation of government finances and strengthening of economic competitiveness. A further goal will be increased efficiency in public spending, particularly in the social sectors. Monetary policy will continue to be managed prudently at the regional level.
16. Fiscal policy objectives for 1999-2001 are based on the ongoing fiscal consolidation to ensure financial viability. The basic budget surplus, which was equivalent to 2.6 percent ofGDP in 1998, is projected to be 2.3 percent in 2001, following implementation of the CET in 2000. The overall fiscal deficit (on a commitment basis, excluding grants)1 will be reduced from 3.3 percent to 2.6 percent of GDP over the same period. Achievement of this objective requires strong revenue collection efforts and continued control of recurrent expenditure, together with an improvement in the quality and effectiveness of current outlays.
17. In April 1998, Senegal launched a tariff reform, partly in anticipation of the establishment of the Common External Tariff (CET) for the WAEMU countries. To continue with the implementation of the CET, on January 1, 1999, Senegal has applied the WAEMU system of harmonized product classification, except for 150 products for which the government has submitted reservations, and end-use tariff discounts for specific industrial inputs (précisions tarifaires). Concerning the précisions tarifaires, the government will submit 655 précisions pertaining exclusively to social products (medication and school books) and subject to negative nominal protection to the WAEMU Commission, with a request to replace them by appropriate customs arrangements agreed upon at the regional level; a further 473 précisions discounting customs duties and VAT, or serving as identifiers, will be eliminated by September 30, 1999; finally the 392 remaining précisions pertaining to imports subject to a zero or positive nominal protection will be eliminated by December 31, 1999 in line with the introduction of the last phase of the CET. Senegal has also applied the 80 percent reduction in tariffs on industrial products originating from other WAEMU countries covered by the Community Preferential Tax (TPC). With the full implementation of the CET beginning on January 1, 2000, Senegal will reduce the customs duty applicable to category 3 imports (finished consumer products) from 25 percent to 20 percent, raise the tariff reduction on WAEMU products to 100 percent, and replace the 5 percent customs stamp duty with a statistical fee at a rate to be adopted regionally. In keeping with the supplementary protective mechanisms in support of the CET, Senegal will amend its national legislation to incorporate the Degressive Protection Tax (TDP) and the Conjunctural Import Levy (TCI). Reference values will be applied in line with the relevant regional provisions, taking into account Senegal's position on minimum values, endorsed by the World Trade Organization (WTO).
18. Senegal subscribes fully to WAEMU's program to harmonize domestic indirect taxation, notably with respect to VAT and excise taxes. In this context, the government has decided to establish on July 1, 2000 a single rate VAT at 18 , in harmony with the rates prevailing in most WAEMU member countries, and calculated so as to offset the expected revenue losses from the full implementation of the CET. Computerization of VAT administration will be effective in 1999. An interface with the customs computer system will be installed to allow for better control of taxpayers subjected to VAT levied domestically. The plan to regroup management of central and local government taxes in a single directorate isclose to completion. A separate unit will henceforth be responsible for monitoring compliance of large enterprises. This reorganization of the Directorate General of Taxes and the Land Office will also include the strengthening of local tax offices. Reducing the scope of exemptions will be facilitated by the adoption, at the regional level, of a common list of goods and services that will be exempt from VAT.
19. The government will consolidate the gains achieved in the management of recurrent spending and, in particular, will streamline personnel expenditure. In addition, following the clearing of extrabudgetary payments arrears through the 1997 supplementary budget, the government is determined to strengthen existing mechanisms to prevent the accumulation of arrears. The recommendations of the Public Expenditure Review will be used to establish a system of budgeting-by-objectives for the pilot ministries of Health, Education, and Justice, beginning in 2001. Meanwhile, the government will continue to increase the resources allocated to the social sectors while improving the programming and execution of public expenditure in these sectors. In this context, a study is under way that will propose solutions for removing the bottlenecks constraining spending in these sectors. In particular, budgetary outlays on health will continue to increase to reach the norm of 9 percent of total operating expenditure in 2002 as recommended by the World Health Organization (WHO). The continued increase in current expenditure during 1991-2000 in the resources allocated to basic education will contribute to the increase the primary school enrollment rate to 70 percent in 2000 and 75 percent in 2001.
• Current expenditure
20. The implementation of a permanent system for managing government personnel will be completed in 1999. Linking the files of the civil service, payroll, and other administrations will permit better control of the size of the civil service and the wage bill. The authorities will continue efforts to stabilize the size of the civil service, matching new recruitment with retirements. The new mixed system of merit-based promotion in the civil service will be fully operational before end-1999; an assessment grid will be developed for each civil servant based on the relevant performance evaluation factors. Substantial budgetary appropriations will support the implementation of the program to combat poverty, the chief components of which are to: (i) strengthen the productive capacities of the disadvantaged segment of the population through the promotion of microprojects that generate revenue and employment; and (ii) improve access to basic social services through a rehabilitation and construction program of community infrastructure in the areas of health, education, provision of drinking water, electrification, and opening up to the outside world. Also, resources allocated to the Ministry of Justice have been greatly increased in the 1999 budget in order to continue the recruitment and training program for magistrates which began in 1996. In addition, the government will provide adequate human and material resources to the fiscal administration in order to increase efficiency and output.
• Capital expenditure
21. The government has adopted a program approach for managing public investment expenditure, consistent with the macroeconomic framework underlying the reform program. The three-year public investment programming system will be improved through a more effective project evaluation and monitoring capabilities, and the rationalization of budgetary allocations. A steering committee has been set up to monitor the financial and technical execution of public investments. In addition, the government intends to gradually increase domestic saving in order to enhance the contribution of domestic resources to public investment, with the objective that by the year 2000, it will devote 20 percent of tax revenue to domestically-financed investment expenditure as recommended by the WAEMU guidelines. The data on investment expenditure will henceforth cover all investment and pre-investment expenditure (studies and project preparation funds) shown in the Budget Consolidé des Investissements (BCI) and the Programme triennial des Investissements Publics (PTIP) irrespective of the sources of financing.
• Other expenditure
22. The government has reviewed the recommendations of the actuarial study of the national retirement fund (FNR) presented by the ILO and has identified actions to be taken to ensure the viability of the Fund beginning in 2000. Measures aimed at restructuring the Dakar urban community (CUD) to guarantee its financial viability will be implemented in 1999. With respect to the postal service (SN La Poste), the government will comply with the provisions defining its relations with the institution, and will initiate a study on ways and means to safeguard its long-term viability.
Money and credit policy
23. The BCEAO will continue to pursue a prudent monetary policy consistent with the government's growth, inflation, and balance of payments objectives. The government will closely monitor the rate of growth of the money supply and will continue to reduce its indebtedness to the banking system so that adequate credit can be extended to the private sector. Credit to the economy is projected to increase by about 11 percent a year, on average, between 1999 and 2001. The annual growth of the money supply will be moderate during this period. Senegal will support the efforts of the regional monetary authorities to increase recourse to indirect money and credit management instruments, essentially favoring a policy of flexible interest rates associated with the system of required reserves. The WAEMU regional securities exchange, which commenced operations on September 16, 1998, should improve the efficiency of financial intermediation. The Banque Senegalo-Tunisienne has been restructured, recapitalized, and sold to private operators. The government will support the WAMU Banking Commission's efforts to ensure compliance with prudential ratios by banks operating in Senegal. The provisions of the Banking Commission will be implemented to ensure that all banks comply with prudential regulations, particularly those pertaining toinsider lending ratios. The development and solvency of mutual institutions or savings and loan cooperatives and other financial organizations will also be closely monitored.
V. Structural and Sectoral Policies
24. The structural and sectoral reforms to be implemented over the next three years are intended to reduce the structural weaknesses and sectoral inefficiencies of Senegal's economy and to put it on a path to sustainable growth. These reforms include completion of privatization operations and restructuring in the parapublic sector, promotion of private sector investment, as well as the pursuit of new reform initiatives launched in 1998, particularly those relating to good governance.
A. Structural reforms
• Parapublic sector reform
25. The government will withdraw from commercial activities before end-2000 through total or partial privatization and/or the liquidation of the public enterprises in its portfolio. Implementation of this program will be accompanied by appropriate measures to mitigate its social impact.
26. Following the sale in March 1999 of one third of SENELEC's capital, the authorities will complete the company's privatization by November 1999, by putting up for sale another 26 percent of share capital, which will reduce the state's share in the company to 41 percent. A buyer has been selected for Air Senegal and will take over the enterprise in June 1999. For the rest of the year, the program provides for the privatization of about 10 other enterprises for which preparatory work is well advanced. The requirements for privatizing the Hôtel Méridien-Président have been established and publication of the international call for bids will be launched by end-August 1999. Regarding the urban transport company (the former SOTRAC), liquidated in November 1998, a new company with private majority shareholding will commence activities in November 1999. The call for bids for the choice of a strategic partner for the groundnut company (SONACOS) has been launched and the offers will be assessed in July 1999. The provisions for the institutional reform of the cotton company (SODEFITEX) have been prepared for implementation by November 30, 1999. Four other companies will be privatized in 1999: the company to manage the Dakar industrial estate (SODIDA), a tapestry weaving company (MSAD), an industrial promotion and research company (SONEPI), and a real estate company (SICAP). The Dakar-Bamako international railway will be under private management beginning in December 1999 with the establishment of a new private company (SETI). A second group of enterprises featured in the 1999-2000 restructuring program includes the Société d'importation et d'exploitation cinématographique (SIDEC), the Société d'aménagement de la petite côte (SAPCO), the centre d'étude et de recherche pour l'équipement (CEREEQ) and the reinsurance company(SENRE). The needed feasibility studies will be conducted in 1999, while those related to CICES and LONASE will be launched in 2000. The sale of the assets of the national drilling company (SONAFOR) should commence, once the cross-debts with the private enterprise that took over its management in 1984 have been settled. In 2000, the government will implement the recommendations of the recent feasibility study on the privatization of Senegal's airports. At the end of the privatization process, only utilities, industrial promotion, or social service companies will continue to be publicly owned.
Reform of the legal framework and of the judicial system
27. In order to encourage economic competitiveness and the development of commercial activities vital for accelerating growth, the government will continue its efforts to improve the legal and judicial environment. As part of the harmonization of business law in the WAEMU area, national legislation will be amended, as necessary, to bring it in line with the new standardized OHADA laws on collection and execution procedures on the basis of the studies conducted earlier in the year by the Legal Reform Committee. Action will also be initiated to modernize the commercial court, including the specialization of clerks' offices and the need to provide such offices with adequate equipment, based on the recommendations stemming from consultations held earlier in the year. Certain paralegal professions, such as trustees, receivers, and court-appointed administrators of enterprises in difficulty, will be reorganized to ensure compliance with professional standards and business ethics.
Private sector development and investment promotion
28. Promotion of the private sector is at the heart of the government's strategy to accelerate growth. The government has prepared a development strategy for the private sector, which takes into account the recommendations of the study carried out by the Foreign Investment Advisory Service (FIAS) of the World Bank, on the administrative procedures required for new investments. The measures featured in the strategic action plan to be implemented in 1999 and 2000 could include, notably, the establishment of an agency to promote investment and exports, a program to encourage professional training, and various actions aimed at consensus-building and social dialogue. The goal is to establish a more favorable framework for the promotion of private initiative, particularly by strengthening the capacities of employers' and professional associations to provide more effective assistance to their members; by streamlining organizations providing support to the private sector and coordinating their actions; by strengthening the management capacity of the private sector; and by promoting partnership between private sector enterprises and scientific and technological research institutions.
29. The government has decided to improve its effectiveness in the area of good governance through a program that will focus on administrative reform, deependemocratization and local government, improve the judicial system and business environment, and strengthen managerial capabilities and development planning.
30. The administrative reform aims to adapt the role of government to changes in the environment and to improve the effectiveness of its interventions in the economy. The redistribution of roles between the state and the private sector requires skilled and open-minded administrative personnel, having the information needed to discharge their responsibilities effectively in the context of a development-oriented strategy. The results of a survey conducted recently on public perception of the administration will feed into a national debate on public services, scheduled for December 1999. The objective is to define, in consultation with users and government officials, an action plan to improve public service organization and operation as well as to match the new missions assigned to the administration with the required quantity and quality of human and financial resources. The planned civil service reform will lead to an administration operating on the basis of clearly defined mechanisms to ensure transparency, responsibility, control, merit, and sanctions, in order to increase effectiveness of services and to reduce costs. In particular, the reform will combat corruption, fraud, and other illegal practices, by intensifying the disciplinary actions through improved cooperation between the judicial institutions and the review departments. This effort will involve all traditional judicial organs but also other structures directly or indirectly responsible for combating corruption such as, the State Inspectorate General, the Court of Accounts, and the Public Enterprise Control and Verification Commission. In March 1998, the Parliament also approved the law establishing the court of financial discipline (replacing the court of budgetary discipline) to pursue and sanction offenses committed in the management of public resources. The major actions to be implemented in the near term are the law on merit-based promotion and the reform of the procurement code--which is designed to achieve greater transparency in the procedures governing public bids.
Regional integration policy
31. In order to fulfil the regional objectives set forth by WAEMU, Senegal will implement customs and trade reforms, harmonization of the framework of government finances, domestic indirect taxation, multilateral surveillance, and sectoral policies. Senegal will achieve the WAEMU objectives, according to the timetable set by the Union, particularly with respect to the reforms of the Common External Tariff and related measures, and the introduction of a single VAT rate. Senegal is determined to implement other regional programs and sectoral policies under way or planned, including the regional investment and mining codes.
B. Sectoral reforms
32. Consistent with its commitments in the letter on energy sector development policy, the government will continue to adjust the price ceiling on petroleum products every month. The protective surcharge on refining will continue to be lowered each year and will be removed by2002. The subsidies to support SENELEC fuel and butane gas prices will be progressively eliminated by 2001 and 2002, respectively. In the electricity subsector, after the deregulation of electricity production, the privatized SENELEC was granted a concession as sole purchaser for a period of 10 years, and a monopoly on distribution and transmission of electric power within the concession area. The Senegalese rural electrification agency (ASER) will be in charge of accelerating electrification in the rural areas. The urban and rural electrification targets are to increase coverage from 50 percent to over 60 percent in urban areas and from 5 percent to 15 percent in rural areas. In the domestic power subsector, the main actions planned are: (i) to rationalize forest logging by enforcing the new forestry code, transferring responsibility for, and the proceeds from, forest logging to local governments; (ii) to diversify fuel and equipment under the butane promotion policy and the search for suitable kerosene equipment that can be used to promote this source of energy for household use; and (iii) to deregulate charcoal and firewood prices in December 1999.
(b) Water resources
33. The government attaches high priority to increasing control over water resources management. To this end, the national water board was created and the Water Technical Committee is already operational. Studies are being carried out under the Organization for the Rehabilitation of the Senegal River (OMVS) on how to maximize the efficiency of the Diama and Manantali reservoirs. The government is also contemplating calling on the private sector to finance and operate the infrastructure required to meet Dakar's long-term water needs. A regulatory agency for the urban water supply subsector will be created by end-2000. Indirect taxation will also be harmonized throughout the water sector before year-end. The long-term viability of the rural sector drinking water supply system will be secured by implementing the reform of the water wells management system. This reform is based partly on the transfer of the recurrent costs of the water pumping and distribution equipment to the communities concerned and on the increased involvement of private operators in the areas of exploitation and maintenance.
34. The letter of sectoral policy adopted in January 1999 defines the framework for the transport sector loan (PST II) of the World Bank for 1999-2004, which will succeed the transport sector adjustment loan (PAST). In the road transport area, the physical objectives of the five-year road maintenance program will be to rehabilitate the paved and unpaved road network and to eliminate areas of congestion throughout the road network. The regular rehabilitation and maintenance program will be maintained. To improve the efficiency of maintenance and the quality of the road infrastructure, an autonomous road maintenance agency (ATR) will be created in the second half of 1999. To improve the strategy of road maintenance and planning and programming, a Road Fund Advisory Committee (CCFR) was established in the first quarter of 1999. The urban transport subsector is covered by a separate policy and is now managed in Dakar by the Dakar Urban Transport Executive Board(CETUD). To handle traffic in downtown Dakar, an operator will join Senegalese nationals from the private sector to operate the downtown busing system, while public transport in the suburbs will be serviced by Senegalese nationals from the private sector.
35. In the rail transport area, international traffic will, as of December 1999, be exclusively handled by a company created jointly by Senegal and Mali (SETI), the majority of whose capital will be held by private shareholders. The operation of the Petit Train Bleu will be entirely in the hands of a subsidiary of the Senegalese National Railways (SNCS), which will be restructured.
36. For port, river, and maritime transport, the port development program includes the ports of Dakar, Kaolack, and Ziguinchor, and the maritime and river transport program will focus on reinforcing the Merchant Marine Directorate, with the active participation of the private sector. The program established under the PST II includes continuing the development of the north zone of the Dakar Autonomous Port, the renewal of its naval equipment, and the implementation of the environmental action plan. On the institutional side, particular emphasis will be placed on maintaining the Dakar Autonomous Port's competitive edge.
37. Regarding air transport, the new owner of Air Senegal will take control in June 1999. The other activities involve the construction of an airport at Ziguinchor, the rehabilitation, modernization and expansion of current airport infrastructure. Furthermore, the privatization of management of the airports and the restructuring of the Civil Aviation and National Meteorology Directorates will start by June 2000.
38. The government places high priority on agriculture, the main source of employment and income for over 60 percent of the population. The achievement of sustainable growth in the agricultural sector depends on its ability to improve its productivity and its competitiveness, both of which are predicated on reliable water supplies. Consequently, the agricultural and livestock sectors will be encouraged in the agro-ecological zones that have reliable water resources. The agricultural sector strategy will be based on a broad nationwide consensus. With the goal of improving the assistance provided to the agricultural sector, the government has established a support program for producer organizations (PSAOP). The central, regional and local offices of the Ministry of Agriculture will be restructured, agricultural and food-processing research will be reorganized, and a new agricultural and rural board will be established. The agricultural services provided by the public sector will be limited to the following functions: (i) guidance, analysis, and projections in connection with agricultural development policies and programs; (ii) monitoring, coordinating and evaluating the agricultural development actions and policies implemented by public or private sector agents; and (iii) regulation and supervision. These various programs, intended to improve the institutional environment and to strengthen the bases of agricultural production, are reinforced by several measures to promote private enterprise in agriculture, in particular by facilitatingaccess to inputs and credit, and securing financing through a land ownership reform that would give investors all the guarantees that a free market can offer. These objectives are also pursued through the introduction of the agricultural exports promotion support project and the study under way on the establishment of a sustainable rural credit scheme.
39. The government's objective in this sector is to increase livestock production on a sustainable basis, to provide food security, to raise producers' income and to preserve natural resources. One of the priorities is to reinforce the capacities of the socio-professional organizations, in order to increase their participation in the production and management of the various subsectors. Veterinarian medicine is already in the hands of the private sector. State intervention will focus on executing programs to remove the constraints to the overall development of the sector, including: (i) by effectively improving the data collection system; (ii) by increasing productivity in the various animal industries through genetic improvements of the species by artificial insemination, finding high quality cattle feed, and the operational rehabilitation of the Doli Ranch, the management of which will be progressively privatized; and (iii) by promoting the export of products from this sector.
40. The aim of the new fisheries code, which was introduced in June 1998, is to safeguard fishing resources. This code will make it possible also to institutionalize coordination with the professionals by establishing the National Fisheries Advisory Board, with local branches, to manage fishing resources sustainably and rationally. The overall fisheries plan is a comprehensive indicative program of actions, and it includes all the priority actions in the areas of infrastructure, rehabilitation and modernization of the sector. It will be supported by a sectoral policy which, by bringing together all those involved into a cooperative effort, will facilitate the search for, and mobilization of, additional financing under the investment program included in the overall plan. The process of privatizing fisheries equipment will be completed by end-2000.
41. Senegal will update its mining code to harmonize the legal and regulatory framework as part of the regional integration process. It will submit a report to the WAEMU Commission by end-November 1999 on the establishment of a regional mining program. The database on geology and maps will be operational in 1999.
42. The main aims of the Strategic Development Plan for this sector chiefly concern actions to promote the "product" and the "destination", the improvement of accommodation and attractions at all the major tourism sites, training and revitalization of investment, and thesetting up of a monitoring system. All these actions are aimed at increasing overall competitiveness of the sector largely in the hands of the private sector; government action essentially being limited to putting in place a favorable framework for the revitalization of investment. Thus, it is planned that, apart from the installation of basic infrastructure at Saint-Louis in Casamance, in the Saloum Islands, and on the Petite Côte (Saly Nord)--making the zone more viable for private tour operators to set up operations--support for independent tour operators will better integrate them into the sector. The aim of these measures is to increase the flow of tourists by making Senegal a more attractive destination. The overall objective is to reach a capacity of 50,000 beds by the year 2010 from the current 16,000 beds and over 1 million tourist arrivals per year by the same date.
VI. Development of Human Resources
43. Despite the efforts made and the progress recently achieved, the social indicators for education and health are still modest. The review of government spending in these two sectors as well as the execution of the National Health Development Plan (PNDS), emphasized the low efficiency of expenditure, the limited absorptive capacity, the shortcomings of the budgetary process, the difficulties linked to the implementation of decentralization and the delays in the institutional reform of the health sector. To remedy these shortcomings, the government's strategy will be based on budgeting-by-objectives in these two sectors. A sustainable pay policy for teachers will be designed at the same time as the decentralization policy is improved and the institutional reforms of the health sector are speeded up.
A. Education policy
44. The government's objectives in this sector are a primary education enrollment rate of 70 percent by 2000, and 75 percent in 2001, to accelerate the enrollment of girls, and to improve the quality of teaching at all levels. To attain universal enrollment by 2008, the government intends, as of July 1999, to step up its implementation of the Ten Year Education and Training Program (PDEF) 1999-2008. The aim of this program is to develop an educational system based on: (i) universal enrollment in primary education and the progressive improvement of its quality; (ii) controlling the flows at the secondary and higher levels, taking due account of financing capacity, quality targets, and the contribution of the private sector; (iii) a thorough reform of technical teaching and vocational training; (iv) improvement in management of the educational system in the context of the decentralization process; and (v) increased efficiency in allocating government resources and the mobilization of additional resources from the private sector. In higher education, the reforms undertaken as part of the Higher Education Improvement Project (PAES) will continue to be implemented.
45. The policy of promoting literacy, basic education, and national languages is intended to reduce the illiteracy rate by 5 percentage points each year, so as to bring it down to less than 50 percent by 2000. Emphasis will be placed on female literacy and reducing thedisparities between rural and urban zones, with the help of NGOs, grassroots community organizations and women's groups. The authorities are already putting in place post-education support infrastructure, so as to avoid the risk of those segments of society which cannot continue their education slipping back into illiteracy. The contribution of decentralized authorities and the use of contractual support staff will be encouraged in the area of basic education.
B. Health policy (1999-2001)
46. The new objectives of health policy and social action are incorporated in the National Health Development Plan (PNDS) covering the period 1998-2007. The main objective of this program is to ensure that each citizen is in a reasonable state of health. The PNDS is based on a number of strategic objectives ranked in order of priority in the (1998-2002) Five-Year Integrated Health Development Program (PDIS), adopted in 1997. The aims of the PDIS are: (i) to improve the management and financial viability of the public health system; (ii) to reduce the mortality rate of infants, juveniles, and mothers; and (iii) to help bring down the birth rate (the synthetic birth rate index should decline from 5.9 in 1997 to 5.3 in 2000) and the population growth rate, by improving the management and supply of reproductive health services and by reinforcing the efforts to promote family planning, functional literacy, and school enrollment for girls.
47. Action to be undertaken under the PDIS is basically aimed at effectively reinforcing the primary health care system, in particular by: (i) institutional reforms and support; (ii) improving the access of vulnerable groups to high quality health services (the number of inhabitants per health center and health post should fall from 158,000 and 11,000 in 1997 to 150,000 and 10,000 in 2000); (iii) the campaign against endemic diseases; and (iv) improving the standard of living. The government will continue to increase the health budget to reach the ratio of 9 percent recommended by the WHO by 2002.
48. The hospital reform aims to improve the performance of hospitals by granting them autonomy of financial management. All national, regional, and departmental hospitals are preparing `establishment projects' and putting in place management infrastructure. The National Supply Pharmacy (PNA) will be raised to the status of a Public Health Establishment. Through decentralization, local governments will be called upon to contribute to public health cost-sharing. To provide alternative health financing, the Instituts de Prévoyance Maladie (IPMs) will be revitalized in conjunction with the Ministry of Labor and Employment. The creation of the Mutual Association Support Unit, the IPMs and Health Committees (CAMICS), as well as the regulation of their structures will be effective in 1999.
C. Poverty alleviation
49. To improve standards of living and to mitigate any harmful effects arising in the social areas from liberalizing economic reforms, Senegal has prepared a Poverty AlleviationProgram (PLP). Designed from the standpoint of encouraging private enterprise, the PLP focuses on the following areas: development of individual capacities; promotion of personal responsibility; preference for lasting solutions rather than piecemeal, crisis interventions and preparation of programs targeting vulnerable groups. Short-term actions to improve standards of living include income-generating activities, facilitating access to basic social services, and putting in place programs designed to alleviate food deficiencies among vulnerable groups. The medium- and long-term actions aim at creating the basic conditions to bring the poor into the productive area, through development of physical capital and human resources and improvement of the framework and adjustment of the rules of the economic game, especially by deepening the structural reforms in the key sectors. The overall objectives of the program are, inter alia: (i) increasing incomes through a determined policy of promoting microenterprises and income-generating activities; (ii) improved coverage of essential needs; and (iii) better monitoring of household living standards and strengthening the capacities of those involved at the grassroots level. Program activities are identified by targeting geographical areas, and a participatory approach, which enables those involved to agree on priorities. Local governments will have a central role to play in executing the program.
50. The institutional framework of the PLP was put in place on April 30, 1998. Studies are underway to clearly identify the cost of the actions to be supported, especially the priority investment projects of the local governments. The implementation of the program will benefit from the support of donors, especially through the introduction of local and social development funds. The community food program will be expanded to include other poor urban neighborhoods and the experience of the local development fund will be consolidated in the current intervention zones and possibly extended to other zones. The authorities plan to submit the poverty alleviation strategy and program to development partners by year-end, with a view to mobilizing the resources needed for their implementation.
D. Policy for advancement of women
51. The National Action Plan for Women (PANAF) adopted by the government seeks to accelerate the implementation of the strategies to strengthen women's involvement at all levels and to eliminate all forms of discrimination toward women. In order to facilitate the implementation of PANAF, six priority areas have been targeted: (i) the economic promotion of women by strengthening their organizational and entrepreneurial capacities, the installation of equipment designed to lighten household chores, the expansion of employment opportunities and access to decision-making; (ii) increasing the rate of school enrollment of girls, raising the level of education and training for women, and promoting a gender sensitive attitude through better information; (iii) improving women's health with emphasis on programs supplementing those provided by the Ministry of Health; (iv) improving the legal, social and political status of women; (v) reinforcing the advocacy and financing agencies targeting activities initiated by women; and (vi) taking greater account of the needs and potential of women in national development policies and programs. In 1999, a mid-termreview of all of these programs will be conducted with the donors and a final evaluation will be made in 2001.
E. Environment policy
52. The government will continue to implement a strategy of sustainable development, using the participatory method, which focuses on increasing people's realization of their responsibility for natural resources management. Under the National Action Plan for the Environment (PNAE), currently in force, all projects and programs are currently organized by the administration in conformity with the National Environment Management Program (PNGE), which coordinates on a priority basis actions identified in the activity-organizing sectors. The environment code, which should be the reference framework for the compulsory environment impact studies before any development, ground breaking, infrastructural, or industrial or agricultural installation project that presents any kind of threat to the environment can start, will come into force in 1999. Particular attention will be paid to preserving the people's way of life, especially by protecting the coastal and humid zones in light of climate changes and the struggle against pollution.
VII. Debt Sustainability and Viability
53. The Government seeks to achieve a sustainable external position over the medium term. The structural reforms to be implemented during the program period will contribute toward increasing exports faster than imports, which should help to reduce the current account deficit (excluding official transfers) from less than 7 percent of GDP in 1998 to about 5 percent in 2001. These deficits will be financed largely by private capital, which is expected to show a strong increase especially in the area of phosphate production.
54. The external financing requirements for the period 1999-2001 are estimated at over US$1.6 billion, including an increase of US$158 million in net foreign assets. These financing needs would be covered by public transfers estimated at US$640 million, medium-term concessional loans of about US$560 million, and estimated private capital flows of some US$360 million. The balance of the financing requirements will be met through purchases from the IMF under the enhanced structural adjustment facility (ESAF) amounting to about US$100 million.
55. Senegal's outstanding external public debt was estimated at US$3.1 billion at end-1998, equivalent to 66 percent of GDP. Debt to multilateral creditors represented 65 percent of the total amount, of which about 39 percent was owed the IMF and the World Bank. Debt owed bilateral creditors corresponded to 35 percent of total debt. The effective burden of Senegal's external public debt in 1999 was US$148 million. The savings arising from the debt stock operation of April 1998 are projected at about US$57 million, US$80 million, and US$80 million, for the years 1999, 2000, and 2001, respectively.
56. According to the debt sustainability analysis conducted in 1998, the net present value of the external debt and debt service represented 121.2 percent and 10.6 percent, respectively, of export earnings. These ratios were projected at 117 percent and 10.3 percent for 1999, and 120 percent and 10.6 percent in 2000-2001. Outstanding debt will represent 57 percent of GDP in 1999 and 55 percent over the period 2000-2001. The debt service/tax revenue ratio, which is estimated at 19 percent in 1998, is expected to be 19.5 percent in 1999, and 18 percent in 2000. This level of indebtedness takes into account the impact of the debt stock operation on Naples terms granted by Paris Club creditors in 1998. Senegal will try to improve further its debt profile by seeking from non-Paris Club bilateral creditors terms as concessional as those granted by the Paris Club. At the same time, the authorities will take advantage of any opportunities that arise for debt conversion to reinforce and consolidate programs in the social sectors, as well as in the other sectors to be identified as priority sectors. The authorities also seek to benefit from all initiatives that might be taken internationally to further reduce the burden of debt service. This will allow them to devote the resulting savings to the social sectors in an effort to alleviate poverty.
VIII. Improvement of the Statistical Apparatus
57. The government of Senegal has taken a number of steps to reinforce the planning capacity, to improve the quality and coverage of the statistics, and to better disseminate economic and social information. An action plan has been prepared for the period 1998-2000 to reduce remaining statistical weaknesses in the national accounts, foreign trade, industrial production, and social indicators. The preparation of national accounts data will be accelerated through the installation in 1999 of an appropriate national accounts module, which will benefit from a forthcoming Fund STA technical assistance mission that will focus on statistical weaknesses in the national accounts area. Work on harmonization of the methodological bases of national accounts has started and the results will be formally approved in 1999. This harmonization will facilitate comparability of economic indicators and hence the implementation of multilateral surveillance. A change in the base year and sample for the calculation of a Harmonized Industrial Production Index (IHPI) is planned for 1999. A software interface between the Customs and the Planning and Statistics Directorates is planned for 2000. A permanent infrastructure for surveys will be put in place to track household living standards. Furthermore, the management, publication, and distribution problems faced by Senegal's statistical departments will be solved by strengthening logistics and by the use of new information technology. The government has established a Y2K steering committee to implement an action plan called the Senegalese National Y2K Plan (PNSP 2000). The strategy for preparing this plan covers all the aspects related to the Y2K transition, especially coordination, awareness, communication, training, and completion. It involves all sectors of activity (public, private, parapublic) in a participatory and concerted effort. In this context, appropriate tests will be conducted before end-December 1999 with a view to identifying and resolving any difficulties that could arise during the transition to the Y2K.
1Based on a wider definition of investment expenditures, which includes the investments diectly financed and undertaken by donors.